Icahn Ups Stakes in Ackman Feud With Herbalife Holding
By Duane D. Stanford & Miles Weiss - Feb 15, 2013 12:01 AM ET
It turns out billionaire investor Carl Icahn really is bullish on Herbalife Ltd. and serious about squeezing rival hedge-fund manager Bill Ackman.
Icahn, 76, reported a 13 percent stake in Herbalife yesterday and said he would seek talks with the nutritional supplements company, sending the shares up as much as 25 percent in after-hours trading. Strategic alternatives for Herbalife may include taking it private, he said in a filing with the U.S. Securities and Exchange Commission.
The Herbalife Ltd. logo is displayed outside of the company's corporate headquarters in Torrance, California. Bill Ackman joined Greenlight Capital Re Ltd. Chairman David Einhorn last year in raising questions about Herbalife. Photographer: Patrick Fallon/Bloomberg
Jan. 24 (Bloomberg) -- Billionaire investor Carl Icahn talks about the performance of Netflix Inc. and CVR Energy Inc., and hedge-fund manager William Ackman's $1 billion bet that shares of Herbalife Ltd. would decline. Icahn speaks with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Herbalife Ltd. products are arranged for a photograph in New York. Herbalife executives and consultants hit back on Jan. 10, arguing that all of Herbalife’s payments to distributors are tied to product sales and the company’s accounting practices are legal. Photographer: Scott Eells/Bloomberg
Carl Icahn, billionaire investor and chairman of Icahn Enterprises Holdings LP, seen on March 27, 2012, said in the filing that Herbalife “has a legitimate business model, with favorable long-term opportunities for growth” and that the shares are undervalued. Photographer: Scott Eells/Bloomberg
The disclosure comes almost two months after Ackman said he had sold short 20 million shares of Herbalife and said it was a pyramid scheme. Icahn followed by saying last month that Ackman, 46, acted inappropriately when publicly announcing his bet against Herbalife, reviving a decade-old feud with the founder of Pershing Square Capital Management LP.
Ackman’s wager had already pitted him against Daniel Loeb in a rare public dispute among hedge-fund managers over whether Herbalife is a legitimate enterprise or a fraud.
“Carl Icahn just delivered Bill Ackman a Valentine he’ll never forget,” hedge fund manager Robert Chapman of Chapman Capital LLC said in an e-mail yesterday. Chapman Capital holds a long position in Herbalife.
Herbalife has repeatedly denied Ackman’s accusation that it is a pyramid scheme.
Legitimate Business Icahn said in the filing that Herbalife “has a legitimate business model, with favorable long-term opportunities for growth” and that the shares are undervalued.
Last month, in a Jan. 24 interview with Trish Regan on Bloomberg Television, Icahn said Ackman’s assertion that he was shining a spotlight on Herbalife, the marketer of weight-loss and nutritional supplements, was “disingenuous.”
Icahn, who has spent more than seven years wrangling with Ackman in court over $4.5 million, said in the interview he doesn’t “like” or “respect” Ackman and questioned his motives for publicizing his trade.
“You don’t go out and get a room full of people to badmouth the company,” Icahn said in the interview. “If you want to be in that business, why don’t you join the SEC,” Icahn added, referring to the U.S. Securities and Exchange Commission.
Ackman didn’t respond to telephone and e-mail requests for comment. On Feb. 7 he renewed his claim that Herbalife is a pyramid scheme in a detailed 40-page treatise questioning everything from the company’s sales accounting to claims that it makes millionaires.
Share Purchases U.S. regulators at the Federal Trade Commission and the SEC have declined to say whether they are investigating Herbalife or intend to do so.
Icahn didn’t respond to a telephone request for comment.
He purchased about 1.6 million Herbalife shares between Dec. 20 and Dec. 24, according to the filing. That was after Ackman disclosed on Dec. 19 his bet against the nutritional supplements company. Icahn restarted his share purchases in Herbalife on Jan. 28, after the Bloomberg interview, and after he said in a statement on Jan. 25 that Ackman was taking “inordinate risks” regarding his investment approach to Herbalife.
The stock may become the “mother of all short squeezes,” he said in the statement.
On Jan. 28 and Jan. 29, Icahn acquired another 3.6 million shares and options, primarily through over-the-counter option contracts, the filing shows. He purchased the remainder of his stake through yesterday, according to the document.
Icahn’s stake is comprised of 2.47 million shares and options on another 11.54 million shares.
Raising Questions Herbalife surged as much as 25 percent to $47.77 in extended trading yesterday, after gaining 5.1 percent to $38.27 at the close in New York. The stock has dropped 10 percent through yesterday since Ackman disclosed his short position.
Ackman joined Greenlight Capital Re Ltd. Chairman David Einhorn last year in raising questions about Herbalife. On Dec. 20, Ackman appeared at a Sohn Investment Conference in New York and accused Herbalife of using inflated pricing, misleading sales information and a complicated incentive structure to hide a pyramid scheme.
Herbalife executives and consultants hit back on Jan. 10, arguing that all of Herbalife’s payments to distributors are tied to product sales and the company’s accounting practices are legal.
Ackman’s wager had already put him at odds with Loeb, founder of Third Point LLC. Three weeks after Ackman disclosed his bet against Herbalife, Third Point reported in a regulatory filing that it had bought 8.9 million of the company’s shares.
In taking an 8.2 percent stake in Herbalife, Loeb joined other firms in rejecting Ackman’s theory.
“It’s no secret I don’t like Ackman,” Icahn said in the interview last month. “But that doesn’t mean I am going to go in and buy stock in a company necessarily just to get him.”